1 2 3 4 5 4 200,000 3 700,000 9% 11% 6 7 8 9 10 11 12 13 Long term debt Value on Balance Sheet Market Value of the debt Stated rate of interest Effective rate (or YTM) Shareholders equity Common shares (on the Balance Sheet) Rertained Earnings Market value of shares Beta of the firm's shares Risk free rate of return Expected market return Income tax rate Calculate the weighted average cost of capital. Show the sensitivity of WACC to YTM. 2 500,000 3 200,000 8 200,000 1,500 6% 11% 30% 14 15 16 17 Solution